Jun 24, 2015 - 10:39 AM
We must first state that we are not CPAs or tax attorneys. We recommend discussing this issue with your CPA before entering a lease. Generally speaking though, the short answer is that it can be. It depends specifically on the circumstances. In some cases, income from a cell tower or lease is treated as Unrelated Business Income (or UBI) and in some cases it is not. It appears to us that the primary distinction between whether it is treated as UBI or not is whether the cellular site installation is considered to be real property or personal property. If the former, it is less likely that the church will need to pay tax on the UBI because income from real property is not subject to the UBI. For example, a cell site installation on a rooftop or on a steeple may be treated as income from real property because the building or church steeple is real property. Conversely, the IRS has previously held that income from a lease of a church owned tower is considered UBI and therefore taxable. Here are some articles that we found helpful.
Whether the income is taxed or not, it is still worthwhile to enter into the lease. If you need help determining how much the lease is worth, pleasecontact us.